Executive Summary

The essential food basket for a Bangladeshi family of five costs Tk 6,744 per month (approximately $55 at Tk 122.77 per dollar), having fell 1.2% month-on-month and standing 6.1% lower year-on-year. This basket absorbs 43% of a day-labourer's monthly income (Tk 15,600) and 54% of the RMG minimum wage (Tk 12,500), placing Bangladesh among the most cost-burdened populations in South Asia. With headline CPI at 10.5%, food inflation at 12.5%, and a +5.0 percentage point food-nonfood wedge, the convergence of exchange rate depreciation, stagnant minimum wages, and rising utility costs creates an affordability crisis that demands both immediate commodity interventions and structural wage-price reforms.

Food Basket Cost and Monthly Trends

The WFP-monitored essential food basket, comprising 11 items calibrated to meet the basic caloric and nutritional needs of a five-person household, stands at Tk 6,744 per month, up from Tk 6,823 the previous month (-1.2% MoM) and -6.1% over the past twelve months. The basket includes rice (25 kg), lentils (4 kg), soybean oil (4 L), sugar (2 kg), eggs (60 pcs), potatoes (8 kg), onions (4 kg), wheat flour (3 kg), chicken (4 kg), milk (8 L), and diesel (10 L).

Rice, the single largest component, accounts for approximately 19% of total basket cost at Tk 1,281, reflecting the cereal's foundational role in the Bangladeshi diet where per capita rice consumption of approximately 170 kg/year is among the highest in the world. Import-dependent commodities (soybean oil, wheat flour, lentils, sugar, diesel) account for 40% of basket cost at Tk 2,666, while domestically produced items constitute the remaining 60% at Tk 4,078.

The top three price risers this month, Potatoes (+28.7%), Milk (+9.3%), Diesel (+9.0%), point to mixed supply conditions across the commodity spectrum. The items showing the most restraint, Wheat flour (-7.8%), Chicken (-11.4%), Onions (-19.5%), suggest pockets of relief from seasonal harvest arrivals or government intervention through tariff adjustments.

• Essential Food Basket: Tk 6,744/month ($55)
• MoM: -1.2%, YoY: -6.1%
• Rice share: 19% (Tk 1,281)
• Import-dependent items: 40% of basket cost
• Top Risers: Potatoes (+28.7%), Milk (+9.3%), Diesel (+9.0%)
• Top Fallers: Wheat flour (-7.8%), Chicken (-11.4%), Onions (-19.5%)

Real Wage Purchasing Power and Minimum Wage Adequacy

The central question for Bangladesh's cost of living is not the absolute price level but how that level relates to what workers actually earn. Three wage benchmarks illustrate the affordability crisis:

A day-labourer earning the median Tk 600/day (BBS LFS 2023) and working 26 days per month generates Tk 15,600 in gross household income. The food basket alone absorbs 43% of this income, placing the household in significant pressure on lower-income families. The residual, Tk 8,856, must cover housing, transport, healthcare, education, and clothing for five people.

The RMG minimum wage, revised in November 2023 to Tk 12,500 per month, represents a 56% increase over the previous Tk 8,000 floor. Yet the food basket absorbs 54% of this wage, rendering it strained for a family of five. With food inflation at 12.5% and no automatic indexation mechanism, the real purchasing power of the RMG minimum wage has eroded by an estimated 12% since the 2023 revision. Bangladesh lacks an automatic minimum wage indexation mechanism tied to CPI or food price indices, unlike India's Variable Dearness Allowance (VDA) system that adjusts central minimum wages semi-annually based on CPI changes.

Public sector employees at the Grade 20 entry level (Tk 8,250 per month under the 2015 National Pay Scale) face an even more acute mismatch: the food basket consumes 82% of gross pay, mathematically precluding adequate expenditure on any other category. The 2015 pay scale, now a decade old, has been overtaken by cumulative inflation exceeding 70% since its implementation.

The informal sector, employing an estimated 85% of the labor force (BBS LFS 2023), operates entirely outside the minimum wage framework. Construction workers, rickshaw pullers, street vendors, and domestic workers negotiate wages individually with no floor, no indexation, and no social security contributions. For these workers, the food basket ratio is the most relevant welfare indicator, and at current levels it signals a structural affordability failure.

Essential Commodity Price Stabilization

Bangladesh operates two principal price intervention mechanisms: the Open Market Sales (OMS) program and the Trading Corporation of Bangladesh (TCB) fair-price outlets. Both are structurally limited.

OMS coverage is geographically concentrated in urban and peri-urban areas, temporally inconsistent (activated during price spikes rather than continuously), and quantitatively insufficient (typical daily allocations exhaust within 2-3 hours). The TCB operates in fewer than half of the country's 64 districts, with a product range limited to 4-5 essential items. Neither program covers cooking oil or lentils consistently, despite these being import-dependent items with the highest price volatility.

The import dependency structure creates specific transmission channels. Soybean oil prices are anchored to Chicago Board of Trade benchmarks and transmitted through fewer than ten firms that control bulk edible oil imports. Lentils follow Canadian and Australian pulse markets. Wheat flour tracks Black Sea and North American futures. For all these items, the taka's exchange rate at Tk 122.77 per dollar serves as a critical amplifier: every percentage point of depreciation translates directly into higher landed costs, with 2-4 week pass-through lags for edible oils and 4-8 weeks for wheat and lentils.

The middleman markup structure compounds the problem. BIDS studies document farmer-to-consumer price spreads exceeding 40% for rice, with multiple intermediaries each extracting margins. For perishable items, spoilage losses of 25-40% during storage and transport are priced into retail costs due to inadequate cold chain infrastructure.

Housing, Utilities, and Urban Livability

Housing costs in Dhaka absorb an estimated 42% of household income (REHAB survey 2023), with the ratio rising to 50% or more for low-income workers in Mirpur, Tongi, and Gazipur industrial areas. The formal housing finance market serves primarily upper-middle and high-income households; the Bangladesh House Building Finance Corporation (BHBFC) and commercial bank mortgage products are inaccessible to RMG workers and day-labourers who lack formal income documentation.

Utility costs add a further layer of burden. The BERC electricity tariff structure charges Tk 4.19/kWh for the lifeline slab (0-75 units) and escalates to Tk 8.70/kWh for the 201-300 unit slab. Multiple tariff increases since 2022, driven by the IMF program's subsidy rationalization conditions, have raised the effective cost of electricity for middle-income households by 30-40%. Gas price increases have followed a similar trajectory, with metered gas prices doubling between 2022 and 2024.

The urban-rural CPI gap reflects these divergent cost structures. Urban CPI consistently runs 1-2 percentage points above the national average due to higher housing, transport, and services costs, while rural CPI is more heavily influenced by food prices. This gap means that urbanization, which Bangladesh is experiencing at approximately 3% annually, continuously shifts more of the population into the higher-cost environment without commensurate income gains.

Social Protection Adequacy and Healthcare Burden

Bangladesh's social safety net programs provide transfers that fall far short of actual cost-of-living requirements. The Old Age Allowance (Tk 500/month), Widow Allowance (Tk 500/month), and Disability Allowance (Tk 750/month) have not been meaningfully adjusted since their last revision, despite cumulative food price inflation exceeding 30% over the same period. These amounts cover less than one-quarter of the food basket cost alone.

The VGD (Vulnerable Group Development) program provides 10-30 kg of rice or wheat per household per month, a transfer with a market value of Tk 550-1,950 against a food basket of Tk 6,744. The gap is self-evident. VGF (Vulnerable Group Feeding) operates seasonally during monga (lean season) and post-disaster periods, providing temporary relief without addressing the structural cost-of-living deficit.

Healthcare out-of-pocket expenditure at 72% of total health spending (WHO National Health Accounts) is among the highest in South Asia and functions as a catastrophic cost-of-living shock for the bottom 40%. A single hospitalization can cost Tk 15,000-50,000 (IEDCR/BIDS estimates), equivalent to 1-3 months of the food basket, pushing households into medical debt or asset depletion. The absence of a functional health insurance system means that illness is the single largest driver of transient poverty in Bangladesh.

Private education costs compound the squeeze. Even in ostensibly free government primary schools, families spend Tk 500-2,000/month on coaching, supplies, and transport. Secondary education costs Tk 2,000-5,000/month. For a household already allocating 43% of income to food and 42% to housing, education expenditure is the margin that gets cut first, with intergenerational consequences for human capital accumulation.

Outlook, Risks, and Policy Implications

Three principal risks dominate the cost-of-living outlook:

• Exchange rate pressure and imported inflation: With the taka at Tk 122.77 per dollar and import-dependent commodities constituting 40% of basket cost, further depreciation would compound global commodity price movements. Bangladesh Bank's foreign reserve position, while improved from the 2023 trough, remains insufficient to sustain prolonged intervention. If reserves fall below three months of import cover, the resulting depreciation could add 10-15% to the imported food basket within a single quarter.
• Minimum wage stagnation vs. inflation persistence: The RMG minimum wage review cycle of 5+ years and the absence of automatic indexation mean that real wages erode continuously between revisions. With food inflation at 12.5%, the 2023 RMG revision has already lost significant purchasing power. The public sector pay scale, unchanged since 2015, is now a decade past revision. Without structural reform to wage-setting mechanisms, the cost-of-living burden will deepen regardless of commodity price trajectories.
• Utility pricing reform and subsidy rationalization: IMF-conditioned subsidy reductions for electricity, gas, and petroleum will continue to raise administered prices, adding step-function increases to non-food CPI. The poor, who already face compressed budgets, will absorb these increases through further reductions in food quality, healthcare access, and education spending.

Policy recommendations:

• Establish automatic minimum wage indexation: Tie minimum wages across all sectors to the BBS CPI food index with annual adjustments, modeled on India's VDA system. This would prevent the cyclical erosion of purchasing power between wage revisions and reduce the political friction of ad hoc wage negotiations. The RMG wage board should adopt a formula-based adjustment triggered when cumulative food CPI change exceeds 5%.
• Transform OMS/TCB into a digital, universal food safety net: Issue food security cards linked to national ID, enabling electronic benefit transfers redeemable at designated retailers. Index the subsidy value to the WFP-monitored basket cost, ensuring automatic adjustment. Expand product coverage to include edible oil and lentils. Scale from current partial urban coverage to all 64 districts within 3 years.
• Address housing affordability through targeted finance and urban planning: Create a dedicated housing finance window for RMG and informal sector workers with simplified documentation requirements and subsidized interest rates. Reform urban land use regulation to increase housing density near industrial zones. Invest in dormitory-style worker housing in Gazipur, Narayanganj, and Chattogram EPZ areas.

*Data sources: WFP Bangladesh Food Price Monitoring, Bangladesh Bank CPI data, BBS HIES 2022, BBS LFS 2023, WHO National Health Accounts, BERC tariff schedules, REHAB housing surveys, BIDS market studies. All figures reflect the most recent available monthly data.*